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Financial services


Online and mobile banking trends

The rise in use of digital banking is pushing financial services organisations to connect their online and mobile presence with traditional channels to provide a seamless experience no matter how they bank. Karen McCandless explains why the future is multi-channel

The adoption of digital banking channels is growing rapidly. Busy and increasingly tech-savvy consumers want to interact with banks in a manner of their choosing, without being constrained to visiting a branch to meet their financial needs. According to a comScore report, online banking continued to grow steadily for the top ten global banks last year, while a report by Javelin Strategy & Research revealed that consumer adoption of mobile banking grew by almost 60 per cent from 2010 to 2011. Meanwhile, research from PricewaterhouseCoopers suggests that by 2015, more people will interact with their banks digitally than through branches, and they’ll be prepared to pay for the privilege.

(This article first appeared in the Summer 2012 issue of Finance on Windows, which focuses on Microsoft technology in the banking, capital markets and insurance industries. Find out more about how you can subscribe or advertise in the magazine).

Digital banking channels thus present a massive opportunity for financial institutions but not one that all have fully leveraged yet. Many systems are fragmented and basic in functionality, as well as expensive to manage, secure and update. “Keeping consumers’ financial information safe across channels can be a headache for banks,” says Phil Sorrell, director of Mobile Banking at Temenos. “The internet isn’t secure in isolation and, as a result, banks have had to find alternative ways to authenticate their customers.”

Conversely, customer expectations in this area are high: with information at their fingertips they can afford to be more demanding and fickle, and shop around for the right bank. “The rise in digital banking has been driven by the change in consumer behaviour: they want simplicity, responsiveness and personalised services,” says Emmanuel Viale, senior manager at Accenture Technology R&D Labs. “Users want to connect with their banks anytime and anywhere through the interface, app or service of their choice. In addition, different customer segments have different expectations. This means a bank’s website portal must be adapted for a myriad of customers such as high-net-worth individuals, mass-market consumers and businesses.”

In the future we will see digital channels start to blur, while traditional channels will start to become more digitally integrated, driven and influenced by the rise in online, mobile and social

Emmanuel Viale, Accenture Technology R&D Labs
“Financial institutions have to compete to retain and attract customers in an environment where the expectations of users are very high; they are spoiled by the innovation and dynamics introduced by trend-setters in social networking, e-commerce and online entertainment,” adds Vladislav Dimitrov, director, Dais Software.

The rise in digital channels is also being driven by the differing needs and situations of consumers across the globe. “In certain countries people have to travel for miles to reach their nearest branch, whereas they may have instant access to banking on their mobile phones,” says Sorrell. “For example, according to the UN, there are more mobile phones than toilets in India! Then you have countries like Singapore, where people use ATMs much more comprehensively to move money and pay bills, as well as withdrawing cash.”

As well as the differing geographical needs, the emergence of new channels through which consumers can interact with banks and the lack of integration between digital channels have proved challenging for financial institutions. “Consumers are increasingly engaging with banks through new digital channels such as social media,” says Viale. “The difficulty is that there is fragmentation between the online ecosystem of traditional digital channels such as the website, mobile and more recent advances in social media. There are also new rules of engagement – for example social media is often a very public channel and not a one-to-one interaction – and potential risks to brand.”

This means banks need to present new and innovative ways for customers to interact. “Banks are now forced to break the old cliché of conservative development of new products and services, while at the same time preserving and even improving the levels of security, confidence and trust,” says Dimitrov.

“More and more consumers are using digital channels to interact with their banks for convenience and ease of use, as well as rapid access to information,” adds Steve Shaw, VP, Strategic Marketing; Digital Channels and Electronic Payments Divisions at Fiserv. “This means it’s becoming an imperative for banks to use channels more proactively. Financial institutions must continue to improve, enhance and innovate to encourage consumers to interact and find new opportunities to bank with them.”

And with increasing competition in the market from startups and new entrants, having an innovative digital banking presence is one way banks can compete, bring in new business across the world and differentiate themselves in the market while saving money.

“There is so much competition nowadays with non banks emerging to offer digital services and mobile operators filling the void where banks aren’t operating,” says Sorrell. “This makes attracting new customers and retaining existing ones even more difficult. The only cost-effective way to achieve this is through direct channels such as online and mobile.”

Cost is clearly an important reason to develop digital channels as Sorrell mentions, and pushing more of the day-to-day transactions to the lower cost online and mobile channels can help cut operating costs while delivering an enhanced and targeted experience.

“The lower cost of online channels is a major driver for financial institutions in these economically challenging times – they are trying to push service adoption but also to deliver effectiveness by improved segmentation, enhanced offerings and larger scale of banking functionalities to be used by customers via online channels,” adds Dais Software’s Dimitrov.

For banks, the increasing adoption of these channels also presents an opportunity to open new revenue streams, reaching out to different segments of consumers and converting previously untapped potential. “Online and mobile technologies allow financial institutions to reach new demographics, test business cases and introduce new products and services to a broad audience faster than ever before,” says Dimitrov.

In addition to cutting costs and reaching new audiences, digital banking can deepen and improve the customer relationship. “By presenting information in a relevant and easy to use way, consumers can visit a banks’ site through the device of their choice to find what they need and understand how to take action on it to improve their financial lives,” says Shaw. “Making sure the experience is unique, intuitive and beneficial to the consumer will increase consumer loyalty and satisfaction.”

“Digital banking channels will empower customers by allowing them to transact anywhere and at anytime,” adds Sorrell. “They aren’t dependant on branch opening times or staff competence.”

Several leading banks have already realised the importance of digital channels. US-based Umpqua Bank is using Fiserv online and mobile banking products supported by Microsoft technologies to compete with the likes of Wells Fargo and Bank of America. Tesco Bank, the UK’s largest supermarket bank, is also leading the way in the digital banking arena, while HSBC’s new mobile service for corporate treasurers and senior managers authorised US$500 million in transactions in 19 Asia Pacific countries in its first 19 weeks.

With the rise in digital channels and leading financial institutions like Umpqua Bank, HSBC and Tesco Bank recognising the many advantages they provide, it may be tempting to predict the end of the branch, but this is unlikely to be the case. Rather branches will evolve to a more advisory-style model and take their place alongside mobile and digital as part of an overall multi-channel strategy.

“While online and mobile banking are dynamic and innovative they won’t replace other channels,” adds Shaw. “We won’t see the branch, call centre or ATM go away, but digital channels can make these channels more productive by enabling branch staff to focus on cross- and up-selling.”

With access to the branch and digital channels varying greatly across the globe, banks are realising that consumers will use each channel to meet a different need and this will vary from country to country. “The mobile channel is suited to carrying out transactions and payments on the go; the online channel can be used for in-depth research and the branch for more complex activities,” says Sorrell. “At Temenos, we can provide banks with a secure multi-channel solution that is encrypted end to end. Our ARC Mobile offering provides mobile banking services over SMS, internet browsers and customisable downloadable applications.”

“Mobile banking is particularly popular in countries where there is a lack of infrastructure and, in some cases, young people have leapfrogged the branch and moved straight to mobile,” says Accenture’s Viale. “The M-Pesa mobile money transfer service in Kenya –the first of its kind in the world when it was introduced in 2010 – is a good example of how banks can use digital channels to solve infrastructure issues. This service allows users to deposit and withdraw cash, transfer money and pay bills.”

To enable a secure and coherent multi-channel experience, banks must present a consistent and seamless experience across channels with the information no longer siloed but available at all stages of the process to all relevant parties. For example, when a customer starts a loan application online and goes in to the branch, the staff need to be able to access the loan information and understand the consumer’s needs to finish the transaction.

“Consumers are going to be iterative with how they interact – one day online, one day mobile and one day in the branch,” says Shaw. “Banks thus need to ensure customer interactions are productive and information across all channels is consistent. At Fiserv, we are focused on having those cross-channel technologies interact with each other to provide a holistic view to the customer and the bank.”

In addition to providing a banking experience that is consistent across channels, banks also need to make sure they move away from a one-dimensional digital offering and deliver a better experience across a range of devices while delivering new and innovative functionality that will enable customers to do more online and on their mobile phone.

“Banks have to secure the availability of financial services via all channels, on devices of all scales and form factors,” says Dais Software’s Dimitrov. “They will also strive to analyse and apply profitable business models in the areas of mobile payments, social features, personalisation and interactive communication.”

As Dimitrov mentions, providing a personalised experience for the customer will be a key way banks can promote loyalty and connect with their customers in a more relevant and contextual way. “Banks will use advanced analytics to gain a better understanding of what consumers are doing online and through social media,” explains Viale. “They can then turn this into actionable insight to provide a personalised experience tailored to customers’ preferences and needs.”

These advances in technologies and the proliferation of devices that consumers are already familiar with could lead to a convergence of the online and mobile channels.

“In the future we will see the different digital channels start to blur, while traditional channels will start to become more digitally integrated, driven and influenced by the rise in use of online, mobile and social,” says Viale. “For example, call centres will use video chat to interact with customers and the branch will become more mobile and digital in nature.”

Fiserv’s Shaw adds: “In the future, consumers won’t know through which channel they are connected, they will just know they are connected – anytime and anywhere. This could involve getting an alert via your TV or Xbox and then paying the bill on your smartphone. Connected devices enable banks to proactively help consumers manage their financial lives and those that take advantage of this will be the innovative leaders.”


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